The Customer Mobility & Corporate Inertia is the source of the present problems of corporate survival and growth.
It must be deeply understood that the customer defines the product and not the producer.
The Chinese Government wants to promote electric cars.
As the AP reports – “BEIJING (AP) – Automakers face a dilemma in China’s huge but crowded market: Regulators are pushing them to sell electric cars, but customers want gas-guzzling SUVs”.
The industry is rattled by Beijing’s proposal to require that electric cars make up 8 percent of every brand’s production as early as next year. Consumers are steering the other way: First-quarter SUV sales soared 21% from a year earlier to 2.4 million, while electric vehicle purchases sank 4.4% to just 55,929.
“It’s tough for someone with an EV to come and take away market share from SUVs”, said Ben Cavender of China Market Research Group.
This is a paradox and a typical case of Customer Mobility & Corporate Inertia at the same time.
The paradox is that because of electric motor and IT technology the electric car wheels are ideally suited for SUV vehicles because they can be better controlled electronically than mechanically. An electric SUV, digitally controlled, can outperform a mechanical SUV off-road and in all terrain conditions.
The typical case is that someone above, in the production process, decided what the customer must have, ignoring the fact that every suburbia dweller desires a big jungle-crossing SUV.
The easy solution would be to produce an electric SUV. The reason it does not happen is that the decision makers do not respect enough the final user, the customer.
It is easy to say that, China being a communist Country, they are used to centralized decisions that do not take the people’s wishes under consideration.
What we must consider is that a lot of Western big corporations behave in the same way.
This article is not about electric cars but about the inability of big corporations to follow the changing wishes of their customers because of their built-in inflexibility and inertia.
To give one example the iconic names of Nikon, Canon etc continue to produce their magnificent lens cameras, ignoring the fact that, progress in photography of smart phones and tablets together, with built-in simplified photo-shop techniques, make those magnificent big monster cameras as obsolete as a 1953 Leica camera, which was the dream of any serious photographer at the time.
A simple observation of how many people take “selfies” and how fewer people carry bulky cameras in every tourist site would be enough to persuade the top decision makers of the camera producing industry that they must change or die.
But this is difficult. All those superb micro-engineers that design fantastically accurate shutter speeds, all those magnificent lens designers on the talents of whom, the photo industry is based; they cannot be ignored and become obsolete overnight.
Yet this is the reality. A photo producing company to survive should produce only new type lenses and advanced digital photography applications that they could market through smartphones or tablets, proudly stating “Nikon inside” in the same way that “Intel inside” is a USP for any computer.
The problem of the corporations is that they are inherently afraid of risk, unless some visionary courageous individual is at the top and lead them to change, which all corporations do reluctantly.
The Soviet Union was brutally industrialized by Stalin and further promoted by Nikita Khrushchev and it was then almost becoming a match with the USA. By the time Brezhnev and his gang took over for many years, they were content to let things unchanged while the World was progressing and the Soviet Union simply disintegrated.
The Chinese on the contrary having observed the Soviet collapse through leadership apathy, learned to move with the times, innovate, abandon the communist ideas and provide a better life for their people at least up to now.
While both systems were and are dictatorships, and I do not support that, the moral of this is that only the one that moved with the times due to the perceptive, realistic and competent Leadership, survived.
Like the Countries mentioned above, big corporations and even smaller ones are not exactly Democracies. There also key strategic decisions are taken by very few people at the top and only time shows if the decisions were the right ones, often when the Leadership that took them has retired.
In our times the customer movement changes faster. Preferences – choices & modes of product selection by the customers changes almost yearly.
When Steve Jobs said that “customers don’t know what they want until we’ve shown them”, he did not mean that customers will consume anything offered to them.
What he did mean was the need to anticipate customer demand by being ahead of the market. All his products were feasible with existing at the time technology. The originality was in the use of the forward edge of technology to offer the customer the next generation of existing products. Music playing products existed much before the iPod. Jobs used the existing external data storage device to create a very easily portable media player with the infrastructure (iTunes) to support it.
He was not much ahead of the others, but enough, and continuously innovative enough to outperform the competition.
This is the Amazon Bezos continuous innovative approach. The following is an extract from the beginning of Jeff Bezos letter to his shareholders:
“Jeff, what does Day 2 look like?
That’s a question I just got at our most recent all-hands meeting. I’ve been reminding people that it’s Day 1 for a couple of decades. I work in an Amazon building named Day 1, and when I moved buildings, I took the name with me. I spend time thinking about this topic.
Day 2 is stasis followed by irrelevance followed by excruciating, painful decline followed by death. And that is why it is always Day 1
As Steve Blank observed, there’s been lots written about how companies need to be more innovative, but very little on what stops them from doing so.
Companies looking to be innovative face a conundrum, every policy and procedure that makes them efficient execution machines stifles innovation”.
The whole issue revolves around the Business Model. Corporations do not want to change the Business Model because they were built around it to exploit it to the full, repeating it and enlarging it.
The Business Model took the form of religious dogma in the Corporations and any 
executive who questioned it did so at his/her peril.
A typical example is the American Automotive Industry. From World leader after the WWII, it is called the “rust belt” today. The cause was the industry’s extreme conservatism. No innovation was accepted except changes in the external design of the radiator and increases in the horse power. Even successes like the Thunderbird or the Camaro, were timid extrapolations in relation to the potential available. Even the installation of seat belts was not adopted by the very conservative top management of the auto industries of America on the basis of extra cost without increased customer attraction. Then the Japanese invaded in quantity and the Germans in quality. Both offered better value for money cars and anticipated customer needs by offering, included in the basic price, radio-cassette players or factory made air conditioning. The lesson was not accepted by Detroit.
The root problem is that Corporations are successes of the past that are very slowly dying. Their basic assumption is wrong. They consider that with the tools available they know the customer and if they execute in accordance with their customer perception all will go well.
It is not true. The tools at the disposal of corporations are the tested and approved tools of yesterday. Many Corporations refuse to admit that the customer has transmuted and so must the tools.
It must be pointed out though, that the principal problem with data is, that it is so much of it and increasing. Corporations can only use meaningfully a small fraction of the data they collect. They need to apply innovative, complex and sophisticated techniques of data processing, filtering and synthesis. This is the only way to develop insightful and predictive conclusions about the changing nature of both their customers and the forms of consumption.
While there is a lot of basic consumption going strong in emerging countries, the more affluent inhabitants of the developed countries have radically changed their consuming habits. Many prefer, instead of buying a shirt, to subscribe to their preferred web site. Many prefer, instead of changing their car this year, to take a trip to an exotic place.
The information revolution and the transformation of the whole World societies by the new evolution of information development and transfer are rapidly changing the customers and their needs,
This is why Bezos sticks with Day 1. This is why he accepts the risk of taking decisions by knowing only 70% of the relevant information and decisions are based on the majority and not the totality of the consensus of decision making executives.
All other things being equal, it is enough to be consistently only 51% right to win.
The Japanese model of total executive consensus is obsolete in the rapid transmutations of the various models of customer behavior.
Success and growth require both strategic foresight from the leadership and adaption to the customer demands agility from the Corporation/Company.
It is the optimum to have both. When agility is lacking due to big size, then leadership foresight of the customer changing demands is the key asset of the organization.
“The best way to predict the future is to create it”, Drucker advised.
The only way to create the future is by risking the change of the present steady Business Model to one of continuous innovation and accepting reduced data decision making based on reduced data input which accepts a certain element of risk.
No profitable Business is without risk.
Certainty, if it ever existed, is gone.
A combination of broad, emerging technology, use, with rapid, only statistically correct, decision making, is the present future.
